Debt Collection Letters: Writing a Firm Notice That Gets Attention

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Your debt collection letter: Is it getting noticed or tossed?

Office Trash, C2C ResourcesThe process of collecting a debt can be nothing short of maddening.

You send reminders, you call, you hear excuses until finally, you find yourself writing an angry Final Demand Collection Letter.

If you’ve gone through this process even once, you know how easy it can be to lose your cool. And justifiably so!

But the fact is, unprofessional, angry verbiage or empty threats will most likely get your letter tossed in the trash.

You need your collection letters to pack the right punch. You need them to avoid the circular file and solicit payment all while keeping your customer relationship intact.

Start with carefully crafted letters that are professional, factual and fair.

Write a basic template for a letter when you’re not frustrated. Then, when you use the template, make sure the facts and figures you insert are spot-on. This approach will keep your emotions out of the verbiage.

Of course, always start with a friendly reminder collection letter. But if the friendly attempt goes ignored, you have to change your tone.

Here’s an example of an escalated letter:

Dear [Customer],

We do value your business, but are concerned that your past due balance of [$$] has not been paid.

Our credit policy requires that we place your credit privileges at [your company name] on hold until payment is received on the outstanding balance.

We do not make these decisions lightly, but it is important that we are fair to our business and that we require our customers honor their commitment to our credit terms.

Please give me a call if there is a problem in sending your check for the past due balance today.

Thank you for your attention to this matter.

Sincerely,

[Your name]

It helps tremendously to follow a strict debt collection timeline for collection calls and letters, escalating the tone as you progress. This keeps your communication fair and methodical.

Our recommendation is waiting ten days between each communication for up to ninety days. After that, it’s time to send a Final Demand Letter.

By spacing out your communication in a fair and reasonable manner, you’re more likely to retain good customers who have simply fallen behind.

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Example of a Friendly Debt Collection Letter

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Sometimes, making assumptions can get you into trouble. But there are those instances when making an assumption is a good thing to do. When it comes to debt collection notices, it’s smart for your initial contact to be built on the assumption that your customer’s late payment is simply an unintended oversight.

Crafting that first friendly collection letter built around this premise is as simple as stating the facts in a friendly tone. The following as an example:

Dear [Customer name],

Thank you for your recent business. We look forward to a continued business relationship.

I just wanted to send you a quick reminder regarding invoice number [000000] for [$0,000.00] which is now past due. If payment has not already been sent, please send your payment today in order to keep your account current.

Should you have any questions or problems regarding this invoice, please give me a call.

Thank you for your attention to this matter.

Sincerely,

[your name]

Past due invoices are serious and you certainly don’t want that fact to get lost in any fluff. Therefore, it’s in your best interest to keep the letter short, the tone friendly and the expectations clear.

Assume the best when sending your first notice. For most customers, a friendly reminder is enough to prompt the desired action.

The Basics of Debt Collection Letters

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Writing effective debt collection letters requires that you keep your two main objectives in mind:

1. To get the invoice paid
2. To maintain customer good will in the process

In many cases, your delinquent customer truly wants to pay you. While this isn’t true of every customer, it’s good to assume that this is the case especially in your first communication with a first-time late-paying customer. First timers usually respond well to a short, friendly reminder.

In the event that your first notice doesn’t conjure a payment, you’ll need to take the next step toward a more forceful communication. It’s effective to space your contacts about 10 days apart, escalating each piece of correspondence from friendly to firm. Our Collections Timeline can help you schedule your notices and phone calls in a manner that’s fair to both you and your customer.

If you reach the point of sending a Formal Demand Notice, it may be time to consider involving a 3rd party. If that is the action you state in your letter, it’s imperative that you follow through. When your customer’s learn that you take the actions you say you’re going to take, they are less likely to blow you off in the future.

Remaining professional throughout the collection process can help to maintain good will with your customers, even when communication gets uncomfortable. Make your expectations clear in each letter and be prepared to work with your customer toward a resolution for the best chance of collecting the money you’re owed.

How To Write a Great Collection Letter in 8 Steps

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When you sit down to write a debt collection letter, do you find yourself frozen at the keyboard, unable to find the right words?

You may know exactly what it is that you want to say but, for whatever reason, when it comes time to actually write the letter, you struggle to get the words on paper.

Writing a great collection letter is tough, even for good communicators. Frustrations about the past due invoice and the pressing financial stresses that it has caused can get in the way of writing a letter that’s fair. While frustrations and emotions can be a hindrance, it’s possible to rise above and write an effective letter. Try using the following 8 steps to create a collection notice template to use over and over.

1. Limit your letter to one page using short sentences and brief paragraphs.
Don’t feel the need to explain why you need to be paid. You provided a service or goods and your client agreed TO pay. That’s the bottom line.

2. Label the envelope personal or confidential.
This helps to route the letter to the person responsible for the invoice in question.

3. Sign the letter personally.
The fact that you tended to the matter personally adds a level of urgency for the reader.

4. Avoid any wording that could be misunderstood as insulting, intimidating or threatening.
Professionalism through courtesy and respect is always the right path to choose.

5. Don’t apologize.
Any issues regarding your services or goods should have been brought to your attention by your customer long before he or she received a collection notice.

6. Make details clear and paying EASY.
The amount due, your contact information, any reference numbers, your address, phone number, fax number and any other pertinent information should be clearly stated. Include the details for the easiest way to pay you.

7. Be positive.
It’s quite possible that the past due invoice is an oversight and it’s a good idea to treat your first collection notice as if that’s the case.

8. Be firm.
State what you expect: Payment.

Your primary goal is to get paid. Your secondary goal is to retain a quality customer. If you can work WITH her to resolve a debt and thereby maintain good will, that’s even better!

Making The First Debt Collection Call

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Debt collection calls are hard to make. Before you’ve dialed the number, you already know that the call will be uncomfortable, at the least. The most important thing for you to do before the call is to focus on the goal of the call so you can keep the conversation on track.

The goal is simple: To get paid the same day. But in the process of achieving it, you also want to maintain good will so that your business relationship continues to thrive. To help you reach your goal while keeping a good customer, prepare yourself before you pick up the phone.

Your first task is to collect all the essential pieces of information you may possibly need during the call. Have the past due invoice in your hand. This way you’ll be able to recite the facts about the account accurately. You might even find it helpful to have a script in front of you to read from. The following is an example that briefly covers all the key elements of the reason for your call:

Hello, [his/her name] this is [your name] with [your company name]. I’m calling to follow-up on [invoice number] for [$$$]. According to our records it is [XX] days past due. Since we have still not received payment, I wanted to make sure that there was no problem with the invoice and if there is no problem, determine when payment will be made.

If your customer has a history of slow payments, consider changing the last words to: “… and if there is no problem, determine why payment has not been made.”

Naturally you’ll get different responses from different customers. You may have already experienced the typical response of, “Your check is already in the mail.” In that case, simply request the check number, the amount paid and when it was mailed. If the timing is such that the check should have reached you by the time of the call, confirm the mailing address. If it checks out, then it’s time to end the call with the assurance that you’ll check into it on your end and contact them for a reissue if the check isn’t located.

For your customers who promise to mail the payment that same day, your call can end positively with something like:

That’s great! As you know our terms are [net 30] and we try to make sure all of our customer’s accounts are kept current with full purchasing power. I’ll watch for the check in the mail over the next few days.

Customers who are evasive require very firm and specific responses from you. Consider the following as a possible call script for such a customer:

As you know, our terms are [net 30] and this invoice is now [XX] days old. What can be done to expedite this payment and get it in the mail today?

Being firm and yet flexible will serve you well.  There are times when it’s not possible for your customer to pay you the same day as your conversation. In those cases, set a date that does work and then follow up with a phone call if you don’t receive a check by that date.

How about it? How do you prepare for a debt collection call?

Ways to Avoid an A/R Dispute

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Wouldn’t you love it if you never had to experience an accounts receivable dispute?

While it may be unlikely that you’ll dodge that bullet 100% of the time, you can reduce the number of disputes by confirming a few pieces of information with every client right from the start.

Thoroughly discuss your policies with new clients making sure they understand your credit terms.

Make it a habit to call your customer after shipments are made to confirm that it arrived. Ask them if they received it in the condition they expected and if the invoice is correct. This is especially important for first time customers or for large balances. This way, you eliminate the possibility of a late dispute, which is likely nothing more than a stall tactic.

Be pro-active by requiring written purchase orders. POs help to keep the details straight while making it easier to match up paperwork and invoices. Since everything is spelled out on that one form, any disputes that arise may be more easily resolved.

In the event of a dispute …

When a dispute is brought to your attention early, it’s far more likely to be a valid one. Don’t respond to it until you’ve listened intently and gotten all the details. Your customer may have a legitimate issue, maybe not. But you won’t know if you don’t hear the entire story.

Certainly there are customers who will use a dispute as a stall tactic. If that appears to be the case, you may want to put your focus on getting the undisputed portion paid, especially if it appears you’ll have some significant sorting out to do for the disputed portion.

It may be your best option to make a payment modification if that works for you. Make sure you explain your accounts receivable policies again so you can avoid future disputes and past due invoices.

Most of the time, disputes can be avoided by a simple follow up phone call once the goods are delivered. Once your customer sees how seriously you take your business and your reputation for good service, he’ll likely fall in step and take paying just as seriously.

Avoid disputes with great communication. Touch base every step of the way!

3 Ways To A Successful Collection Call

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Follow these 3 steps for a successful collection call

Businesswoman making a call - C2C ResourcesDebt collecting has its challenges. As the collector, you have your set of hurdles. Your past due customer has his. Both perspectives represent real people dealing with financial stresses – just trying to make the business work.

We rely on one another to follow through when engaging in business. Making collections calls takes a little finesse if we want to maneuver successfully through our challenges to reach a resolution. You want 2 things: To be paid and to retain the customer.

Your main objective in a collection call is of course, to be paid the same day, in full. To get there, put the following three things into action during your call.

1.    Listen intently
The more information you have about the circumstances your customer is facing, the better you’ll be able to help her resolve the debt. Give her the time she needs to explain the situation to her satisfaction. On your end, take notes and repeat the key points back to her. Consider the time this takes as an investment in your business relationship.

2.    Remain calm and professional
Regardless of how frustrating collections can be, most customers truly want to pay you. Their debt is nothing but a monkey on their back that they want gone. Typically, just listening to them talk will tell you who falls into that category. These are the kinds of customers who will respond well to helpful, useful solutions or agreements and are most amenable to your ideas.

But regardless no matter how your customer responds, staying calm and remaining professional is always the best route to take. If things heat up ~ keep your cool. Your calm responses have the potential to defuse an escalating conversation.

3.     React with firm flexibility
When you respond to your client with firm but flexible options, you open to doors to options in tough situations. This can be a relief to both you and your customer, because the fact is, while a same-day resolution is desirable, it’s not always attainable. Your customer may suggest ideas that may not be the most desirable for you. But if you’ll remain flexible and open, you may find solutions you’ve not thought of before. Once you come to a solution, be firm about the follow through.

Are your collection calls yielding results?

C2C Resources: Balanced and Fair in Debt Collections

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C2C Resources Debt CollectionMost of us have experienced a cash flow problem at one time or another.

If you’ve made more than a few collection calls, you know; it’s the number one reason for non-payment.

Even the most organized and conscientious customers can fall behind due to cash flow problems. The difficulty you face is that you have a business to run, too. How do you remain fair and balanced with good customers who are experiencing a tough time, while also being fair to your own business?

It’s possible to work with a past due customer in ways that are fair to you both. Start by allowing your customer plenty of time to tell you about the problem in as much detail as he/she will offer. Carefully listen and make notes so you can verify claims when you get off the phone. Demonstrate that you understand what’s been said by repeating the problems back to them.

If your customer offers payment solutions you’ve not thought of, remain flexible and open to ideas. If their idea for payment seems fair and reasonable for you both, put it in writing and have him sign it.

There’s always the possibility that your customer may suggest a payment plan that simply isn’t fair to you or your business. Perhaps you find it impractical or unreasonable in some way. In that case, you may find it helpful to further verify claims through other creditors who are also not being paid before you make any decisions about a payment plan. This may help you determine just how flexible you should be and if you truly want to continue doing business with this customer.

UPDATE: We add this strategy …

In your own mind, frame your collection call this way: You are a problem solver, ready to help your customer get this past due invoice off his back. It’s a financial burden! He wants freedom from it! You can help him get there by being ready with your own ideas for ways to solve the debt.

The more you demonstrate your willingness to work with your customer, the more likely you are to retain him even through this tough spot.

Take your in-house debt collection practices further with this powerful C2C Resources Debt Collection Advice.

3 Ways To Make Debt Collection Calls Easier

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Calling your customer about a past due invoice can be one of the most challenging aspects of operating a business. It’s not unusual for aged accounts to pile up because business owners are uncomfortable making debt collection calls. There is a way to ease some of your own apprehension though. By doing the following 3 things, you may find the calls just a little easier to make.

1. Write down excuses

Before you pick up the phone, sit down and list out the most common reasons and excuses for non-payment you’ve heard in the past. Once it’s completed, think about your possible responses and write those down next to the excuse. Think about what worked before and what didn’t.

As an example, I’m sure you’ve heard the excuse, “The check is in the mail.” And while you hope that’s the case, you can’t know for sure, so you’ll want to press for a more concrete verification. Consider a response like, “That’s good! May I have the check number, amount and date sent so I can make sure it posts correctly?” A response like that isn’t confrontational and may result in a speedy debt recovery.

Silly as you may feel, consider rehearsing your responses out loud. This will help you think on your feet throughout the conversation.

2. Know the details of the past due account

Have the following information at hand in advance of the collections call. This will help you maintain control of the call.

How much is owed?
What are the terms of the sale?
What did they purchase?
When was the payment due?
Are there numerous open invoices?
What is their payment history with you?

3. Put yourself in a positive state of mind

A positive disposition and friendly tone of voice will help to set a good tone for an uncomfortable collection call. Take a few minutes to think positively and prepare your self for a professional, pleasant and respectful conversation. Set yourself on a slow and steady course, prepared to leave ample time for listening to your customer’s point of view without interruption.

Half the battle of making a successful debt collection call is the preparation you do before hand. Feeling like you have all your bases covered before you begin the conversation will set you more at ease and help you stay in control.

How about it? How do you prepare for collection calls?

 

Debt Collections Timeline: How to Stay On Track

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Schedule Collection Calls and Notices using a Collections Timeline

A solid in-house collection procedure is one that carefully schedules a series of letters and phone calls that build upon one another. Having a prescribed timeline in which to send collection letters and make phone calls will help you stay organized, fair and reasonable through the course of trying to collect. Sending too few letters or not making enough phone calls may communicate that you don’t take the matter seriously.  But too many can be just as counter productive, being perceived as harassment.

You want to find that sweet spot, sending just the right amount of reminders at the right time. This can lead to successful debt recovery.

The following is a timeline we’ve built based upon a 30-day credit term.  Of course, you’ll need to adjust the timeline to match your credit terms.

Day  
0 Invoice
35 Past due reminder letter
45 Past due follow up letter on smaller accounts or initial past due call on larger accounts. If time permits on smaller accounts, a call is better than a letter at this stage.
55 Initial past due call or follow up call depending on day 45 action
65 Termination of credit letter or choose one of the 60 day demand letters
80 Final Collection call
90 Final Demand Letter

Follow-up is a critical component to a successful collections timeline. If your client makes a promise, follow-up with a phone call if they don’t keep that promise. If you end up sending a Final Demand notice, stay true to the actions you state in it. If your letter states that you’re turning the debt over to a 3rd party collection agency, then do it.

C2C Resources helps clients with pre-formatted collection letters and call scripts through a web based recordkeeping and management software called Profit Maximizer.